For the past 20-30 years, at least since Ronald Reagan and Margaret Thatcher, the US and other advanced countries have sought to solve economic problems by removing impediments to firms and individuals acting in markets. Collective solutions and collective organizations such as labor unions have been viewed as part of the problem in society rather than as part of the solution. Mrs. Thatcher famously said, “there is no such thing as society.” Globalization has proceeded in much the same manner, with the notion that the correct path has been to deregulate, privatize, and trust that markets will work close to perfect.
This view is no longer sustainable. Markets do many things right, but they also screw up royally. This is most striking today in financial markets with the subprime mortgage crisis. If you are religious, pray for Ben Bernanke and the Federal Reserve who are desperately trying to keep financial markets from making an utter mess of the real economy, as they did in the Great Depression. The issue in finance is no longer deregulation, but getting enough regulations to maintain a stable financial system and making sure when we fix the mess that unregulated markets got us into, we neither reward the “villains,” nor put future market participants into such binds that they cannot do what we as a society want them to do: direct investments to socially useful activities rather than to create Ponzi schemes to enrich themselves.
Financial screw-ups aside, the greatest problems currently facing the world are not problems that competitive markets can solve. There is no way profit-seeking firms will come together collectively to solve global warming and climate change, nor to make sure that the huge demands for natural resources from economic growth now in China and India as well as in the US and other advanced countries do not produce disaster for some countries or persons. Profit-seeking firms have no incentive to deal with the danger of some global pandemic, of protecting us from horrific terrorist biological and nuclear attack. They will not invest in the long-term basic research that might give us alternatives to non-renewable resources or the knowledge to deal with global health problems. The problems of the 21st century are public problems that require an active government and active private non-governmental groups working to resolve.
The only way I can see the US overcoming these problems is for us to move beyond the market triumphalism that followed the collapse of communism toward more cooperative public solutions. Social democrats, progressives, unionists, and yes, conservatives and business groups who want to solve social problems have a great opportunity now to press for a new agenda–for the return of public solutions for public problems. For unions and many on the left, this means moving out of the defensive shell of fending off the attacks of market purists to fighting for expanded collective action to deal with the great problems of our time. For 30 years or more, the world stage tilted in favor of individualistic market solutions. Now the problems demand a tilt the other way. To overcome the great public problems before us, we need more solidarity and cooperative activity, not less. We need to support our public sector workers, not to excoriate government. As Katrina showed, we need effective government, not demoralized, eviscerated government.
Fukuyama saw the end of history just as Mrs. Thatcher saw the end of society. They are wrong. The return of the public means the return to public service. Titans of Wall Street, ideologues of the Washington consensus, wheelers and dealers, your time is past. We have great problems to solve as a nation and as a world. Let’s get to work solving them.